The so-called credit crunch, triggered by the sub-prime mortgage meltdown in the US, is now starting to hit British homeowners in the pocket. Even though interest rates were kept on hold earlier this month, Bank of England boss Mervyn King this week appeared to indicate that borrowers are likely to end up paying more, whatever his committee does with base rates.

On Wednesday, he said the turbulence in global financial markets is "likely to have consequences for the wider economy through the interest rates for borrowing and lending faced by households and companies".

It didn't take long before his gloomy prediction started to become a reality. That same day, Britain's two biggest mortgage lenders, Halifax and Abbey, announced they were increasing the rates on many of their tracker home loans. Both upped the rates by between 0.1% and 0.2% for new customers.

Up until this week, the impact of the turmoil had been limited to a minority of borrowers - mainly people who have had financial problems in the past and buy-to-let landlords (see later). But these moves by leading lenders show it is starting to buffet the mainstream mortgage market, potentially pushing up borrowing costs for millions.

But it's not quite as simple as that. Many economists expect the base rate to fall next year, and this has meant some lenders, such as Alliance & Leicester, have been able to cut the cost of their fixed rate mortgage deals.

So what's the advice for those looking to take out a home loan?

Mortgage broker John Charcol says that for those wanting the security of a fixed rate, there are some competitive deals. A&L's two-year fixes start at 5.48%, though to get this rate you must pay a £1,999 product fee and the maximum loan is £250,000. Britannia building society has a two-year fix at 5.49% with a product fee of £999. In both cases the minimum deposit is 5%.

Woolwich yesterday launched a "market-leading" mortgage fixed at 5.59% for 10 years, which might suit those looking for some long-term security in these uncertain times. You'll need a big deposit as the maximum loan-to-value is 80% and the product fee is £995.

There are still some decent tracker and discounted deals, though you may need to move fast. Moneyfacts is highlighting Newcastle building society's two-year discount with a current pay rate of 5.15% (2.69% off its standard rate). Minimum deposit is 5% and there is a £1,299 fee.

One group of mortgage holders has already been clobbered with hefty hikes in their home loan payments - those whose mortgages are linked to "Libor", the rate at which banks lend to each other. Three-month Libor, which most of these deals are linked to, has risen sharply as banks have become increasingly nervous about lending to each other. This week it hit a nine-year high of 6.9%. "As the new Libor rates kick in - lenders will apply it on specific dates quarterly - these borrowers face a nasty shock," says David Hollingworth at mortgage broker London & Country.

Platform, Britannia's specialist arm, has a number of tracker mortgages - aimed at people with poor credit histories - that are linked to Libor. Last week it upped the rate from 5.87% to 6.75%.

Heritable Bank also uses Libor for some of its mortgage lending. For example, it offers a deal for short-term lending to fund a house purchase or remortgage, where you pay Libor plus 2.25%. At the moment, its Libor rate is 6%. But it will re-price this on October 1, and it is likely to rise sharply to reflect the current turmoil. Somewhat embarrassingly for the government, one of the Open Market HomeBuy mortgages designed to help key workers is linked to Libor. Advantage, part of the Morgan Stanley group, has a deal fixed at 5.59% in year one and 6.59% in year two, which then reverts to Libor plus 2.5% (at today's rate that would put it up to 9.4%).

What should people with Libor-linked mortgages do? "The important thing is not to panic," says Melanie Bien at mortgage broker Savills Private Finance. "Three-month Libor may well fall back within a relatively short time once liquidity issues improve."

If you are on a Libor-linked rate and tied in for a period, you may have to pay a penalty to exit the mortgage, which could be expensive, adds Ms Bien. "But if your rate is significantly upwards and you are struggling, talk to your the lender/broker to see what can be done, such as going interest-only until the situation improves."